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We have all become so used to reading that the end of the world is nigh that we tend to close our eyes and stick our fingers in our ears when there is evidence to the contrary. So you have probably missed one of the biggest pieces of good economic news to emerge recently: energy prices are coming down, in some cases to record lows. Furthermore, even if prices start to recover, they are not likely to return to the ridiculous levels of 2008 any day soon.

Stay with me before you raise an eyebrow to stratospheric heights. This is excellent news, of great import. The trend for gas and electricity bills is downwards; diesel is back at the same price as regular gasoline; the world is practically choking on gas, and is potentially awash with oil.

The main international gas price has this week fallen to a record low, due to a surplus of new resources from North America. Even the stubbornly high oil price has dropped. On Tuesday next week, the main energy suppliers are going to have to explain to the energy regulator why they have not passed this on to consumers. The answer, they tell me, is that they are about to do so, just as soon as they have worked through old gas bought at last year's higher wholesale prices.

There are three really big, but unfashionable conclusions to be drawn from this development. First, bruised and battered consumers are about to receive a welcome tonic alongside the potent dose of reduced mortgage rates which have filtered, spasmodically, into the economic system. We should soon begin to see those pesky direct debits fall, by several hundred pounds a year.

Even the price of oil should come down as the market realises just how much spare production capacity there is, left idle by Opec cutting production and by new projects coming on stream. In other words, there is going to be a second economic stimulus, perhaps as large as the trillions of dollars injected into the banking system by governments and central banks worldwide.

Second, if consumers are the winners, the big losers will be all those dictators and bullies who spent the Noughties strutting about on the world stage, their egos and their state coffers puffed up by oil and gas revenues. Top of the list: Vladimir Putin, Prime Minister of Russia. Note: he has not invaded anywhere this August. Even his friends in Iran are feeling the pinch.

And third â€“ this is the conclusion I know everybody will find hardest to swallow â€“ an era of cheap and abundant energy will be a much-needed tribute to the unfashionable virtues of markets, free trade, capitalism and the performance of an industry at which Britain excels, oil and gas.

How come prices have fallen so much? To understand why, you need to get up to speed on the exciting phenomenon of so-called tight gas. This, after coal, could perhaps be the world's most prolific energy source. Hitherto, we have relied on conventional deposits of gas. But tight gas is locked into difficult rock formations, such as shale, and in the past couple of years the industry has found low-cost ways of fragmenting those rocks in order to get at the gas, particularly in America. The result is that US gas reserves have effectively doubled, almost unnoticed; and the same technology can be readily applied in Canada, Australia, Asia and even parts of Europe.

As we go into the autumn, US gas storage units are almost full to bursting. Facilities once designed to import are being turned around for export. When it comes to gas, America is the new Russia. And for the rest of the world, tight gas equals one thing: freedom.

How has this amazing development come about? Well, my friends, it is the market at work. The high prices of the past decade incentivised a scramble for new technology and projects which are now producing.

A proper global market for natural gas is also rapidly emerging. But unlike the oil market, it has no Opec cartel to dominate it. Previously, gas was only moved about by pipelines and customers had to accept what they were given. But the world pipeline system is being augmented by Liquified Natural Gas, or LNG, which comes in frozen on ships. The difference is absolutely crucial because LNG cargoes can be redirected, and that means they can be traded.Indeed, the average cargo is probably traded tens, if not hundreds, of times and can change course frequently before it reaches its destination.

More at the link.

However I'll believe in cheaper prices when I see it.

Does this mean then we've still got cheap energy to drive our unsustainable economic model?

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Does this mean then we've still got cheap energy to drive our unsustainable economic model?

We can shaft the future once more?

They may be right about gas - although there is a difference between a few % overcapacity in the US crashing prices towards the end of the storage season and a global glut - but oil is a different matter.

Of course, if you suddenly decide to use natural gas for all transport and electricity, you really had better got some serious reserves..

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the main energy suppliers are going to have to explain to the energy regulator why they have not passed this on to consumers. The answer, they tell me, is that they are about to do so, just as soon as they have worked through old gas bought at last year's higher wholesale prices.

right - like they spent a year working through the cheap stuff before they put the prices up last time?

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" On Tuesday next week, the main energy suppliers are going to have to explain to the energy regulator why they have not passed this on to consumers. The answer, they tell me, is that they are about to do so, just as soon as they have worked through old gas bought at last year's higher wholesale prices."

This really proves that the author doesn't know what he is talking about. Petrol prices pretty much dropped and rose by the day with the oil price crash and now current spike. If they had to wait a year to get through all the whole sale stuff they bought then prices would be 80p now instead.

American Public Deserves to Know Chemicals Used Near Their Water Sources

WASHINGTON â€“ Senator Bob Casey (D-PA) joined U.S. Reps. Diana DeGette (D-CO), Maurice Hinchey (D-NY), and Jared Polis (D-CO) today to introduce companion Senate and House bills, the FRAC ACT -- Fracturing Responsibility and Awareness of Chemicals Act, amending the Safe Drinking Water Act. The legislation would repeal the exemption provided for the oil and gas industry and would require them to disclose the chemicals they use in their hydraulic fracturing processes. Currently, the oil and gas industry is the only industry granted an exemption from complying with the Safe Drinking Water Act.

â€œDrilling for natural gas in the Marcellus Shale across much of Pennsylvania is part of our future,â€ said Senator Casey. â€œI believe that we have an obligation to develop that natural gas responsibly to safeguard the drinking water wells used by 3 million Pennsylvanians. We already have private wells contaminated by gas and fluids used in hydraulic fracturing. We need to make sure that this doesnâ€™t become a state-wide problem over the next few decades as we extract natural gas.â€

â€œWhen it comes to protecting the publicâ€™s health, itâ€™s not unreasonable to require these companies to disclose the chemicals they are using in our communities â€“ especially near our water sources,â€ said U.S. Rep. DeGette, Vice Chair of the Committee on Energy and Commerce. â€œOur bill simply closes an unconscionable Bush-Cheney loophole by requiring the oil and gas industry to follow the same rules as everyone else.â€

â€œIt's time to fix an unfortunate chapter in the Bush administration's energy policy and close the 'Halliburton loophole' that has enabled energy companies to pump enormous amounts of toxins, such as benzene and toluene, into the ground that then jeopardize the quality of our drinking water,â€ U.S. Rep. Hinchey, Member of the House Appropriations Subcommittee on Interior and the Environment and Member of the House Natural Resources Committee, said. â€œOur legislation says everyone deserves to have safe drinking water by ensuring that hydraulic fracturing is subject to the protections afforded by the Safe Drinking Water Act. The bill also lifts the veil of secrecy currently shrouding this industry practice.â€

â€œFamilies, communities, and local governments are upset that the safety of their water has been compromised by a special interest exemption, and we join them in that frustration,â€ said U.S. Rep. Polis. â€œIt is irresponsible to stand by while innocent people are getting sick because of an industry exemption that Dick Cheney snuck in to our nationâ€™s energy policy. Many new sources of energy, including natural gas, will play an important role in our nationâ€™s transition to cleaner fuels, but we must make sure this isnâ€™t at the expense of public health. The problem is not natural gas or even hydraulic fracturing itself. The problem is that dangerous chemicals are being injected into the earth, polluting our water sources, without any oversight whatsoever.â€

Hydraulic fracturing â€“ also known as â€œfrackingâ€, which is used in almost all oil and gas wells, is a process whereby fluids are injected at high pressure into underground rock formations to blast them open and increase the flow of fossil fuels. This injection of unknown and potentially toxic chemicals often occurs near drinking water wells. Troubling incidents have occurred around the country where people became ill after fracking operations began in their communities. Some chemicals that are known to have been used in fracking include diesel fuel, benzene, industrial solvents, and other carcinogens and endocrine disrupters.

During the 110th Congress, U.S. Reps. DeGette and Hinchey introduced similar legislation in the House.

There's been a lot about this on TheOilDrum. Basically hydraulic fracking to get natural gas out of tight rock formations will come at a very high price if it ends up poisoning groundwater and aquifers. Once again there's no free lunch, and water is more important for continued existence than more natural gas.

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Even though cheap energy is a good thing I do not think this guy has his head screwed on.

Per person we use some 20 times more in the west than India or china.

Assuming neither of those countries goes totally crazy and screws itself then those 2.5 billion people will get richer and will begin to use energy more like the west. I donâ€™t see them reaching our scale of use anytime soon but even if they use one third of what the west does it will mean a huge increase in demand.

What America should do at this point is convert 50-100 million cars to gas (gradually over time) which will absorb a lot of the spare capacity that is predicted to come online in America.

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Another option is for America to slowly replace their coal power plants with gas power plants and ship their coal abroad. That would firstly make America look greener as gas produces less crap vs coal but also save energy overall as coal is easy to ship while gas requires energy to ship.

Replacing a coal power plant with a gas power plant will equal a 65% reduction in CO2 per unit of electricity produced.

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Another option is for America to slowly replace their coal power plants with gas power plants and ship their coal abroad. That would firstly make America look greener as gas produces less crap vs coal but also save energy overall as coal is easy to ship while gas requires energy to ship.

Replacing a coal power plant with a gas power plant will equal a 65% reduction in CO2 per unit of electricity produced.

However using gas for electricity production is a bit of a waste, as gas is a clean burning fuel which could be bettter put to use for household heating, chemical production and even transport. Using combined heat and power would improve efficiency lots, and is the obvious way to go. There is also a long way we can all go with Solar and Wind projects. Offshore wind and Desert solar power could produce very serious amounts of energy.

Edited August 28, 2009 by BalancedBear

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However using gas for electricity production is a bit of a waste, as gas is a clean burning fuel which could be bettter put to use for household heating, chemical production and even transport. Using combined heat and power would improve efficiency lots, and is the obvious way to go.

Yes gas is a good fuel for many reasons.

For power plants we really should just embrace nuclear and the top 20 economies should aim to produce on average 60-65% of their electricity from nuclear 30-35% from hydro and 5% from renewable as a token to the industry to help them produce better renewable technology.

There is also a long way we can all go with Solar and Wind projects. Offshore wind and Desert solar power could produce very serious amounts of energy.

Lots of things are technically possible but realistically or economically unfeasible.

For now the only viable renewable is hydro, everything else is far too expensive and if we tried to generate most of our energy from solar/wind we would be bankrupt pretty quickly.

However in the not too distant future both wind and solar could become competitive.

The shale reserves have been known about for years. Canada has even more reserves of both gas and oil shale as far as I know. The biggest issue missing from this article is the fact that it has been known for some time that the process used to extract this stuff is dreadfully toxic to the water supply. It also consumes huge volumes of water this depleting reservoirs and aquifers.

Not pretending that we don't have energy problems, but we need to be grown-up and stop pretending that we can have something for nothing. This article seems to present it that way.

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Its all about cycles, even though we hear calls of peak oil and energy crisis being around the corner I never have bought into it.

The Oil and Gas industry is massive, worth trillions of dollars and at all levels of the political divide there is involvement.

The best way to bump up any price is to say its getting less and less and demand more and more.

Its worked with housing until funding was pulled, its worked with oil and gas until the same funding was pulled and now stories of over supply suddenly come out of the woodwork, they still need to sell this stuff and the only way is to drop prices, but there is a crisis we cant drop prices.

Ahh its different now we have more reserves than we first thought so this justifies a reduction in prices, please please buy our oil and gas we can not store it any more, go on please.

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A downward blip in energy prices is hardly a new age of cheap energy. As the finite fossil fuel resources become scarcer, as they will do a long time before they actually run out, prices are bound to rise. Add this to the fact that world demand is going up and up and that even if major new oil or gas reserves are discovered, they might not be available to British customers.

The way things go, if we do see a prolonged period of cheap energy - consumption will go up and people will start buying less efficient cars again, and so on, until the next upward spike in prices.

For power plants we really should just embrace nuclear and the top 20 economies should aim to produce on average 60-65% of their electricity from nuclear 30-35% from hydro and 5% from renewable as a token to the industry to help them produce better renewable technology.

This is very much 'behind the curve', since the UK is already planning to install offshore windfarms that will have the capacity to produce something like half of all our electricity, although their total output would probably be lower than the maximum for most of the time. A few minutes surfing the net will show that these are serious, government-backed proposals that are already well underway - it is the 'Round 3' proposals that will provide the bulk of this renewable energy - including extensive wind farms on the Dogger Bank.

A Severn barrage would produce 7% of our total electricity needs - enough to run all the electric trains in the country several times over. A Morecambe bay barrage would produce about the same amount of electricity.

But whether this will lead to cheap electricity, I'm not so sure! At the dawn of the nuclear era we were promised virtually limitless very cheap power. That never happened. Most of our hydro power is nuclear-linked, as it uses some of the surplus power fed into the grid by nuclear power stations at night to pump the water back up to the upper reservoirs ready for the next day. This makes use of the fact that nuclear power stations are best kept working at a constant output, day in, day out.

Edited August 28, 2009 by blankster

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The main international gas price has this week fallen to a record low, due to a surplus of new resources from North America. Even the stubbornly high oil price has dropped. On Tuesday next week, the main energy suppliers are going to have to explain to the energy regulator why they have not passed this on to consumers. The answer, they tell me, is that they are about to do so, just as soon as they have worked through old gas bought at last year's higher wholesale prices.

That's strange. Domestic energy prices shot up almost immediately gas prices rose. No OLD gas in those days. Suddenly on the way down there's OLD gas.

The same with the recent bounce in oil prices when petrol prices IMMEDIATELY shot up to match. No OLD oil around then.

According to the news the regulator is trying to get a 3.5% (3.5% NOT 35%) domestic electricity price reduction even though gas prices have dropped nearly 70%.

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For power plants we really should just embrace nuclear and the top 20 economies should aim to produce on average 60-65% of their electricity from nuclear 30-35% from hydro and 5% from renewable as a token to the industry to help them produce better renewable technology.

Lots of things are technically possible but realistically or economically unfeasible.

For now the only viable renewable is hydro, everything else is far too expensive and if we tried to generate most of our energy from solar/wind we would be bankrupt pretty quickly.

However in the not too distant future both wind and solar could become competitive.

As blankster has already mentioned, Wind power is already competetive. Nuclear if adopted on the scale the pro-nuclear lobby suggest would be an expensive white elephant, as the overall costs including waste disposal are too high. Wind and Solar power is getting ever cheaper and is the way forward. There are none of the extra costs of dealing with nuclear waste either.

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Didn't crude go down by something like 75% a while back? Of course, that never translates into 75% less at the fuel station. The whole reason for low prices and the massive glut of resources released onto the market is the big play by TPTB to collapse the competition, after which the prices will march skywards.

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I think you'll find the problem is the ga sis in NORTH AMERICA which means it will need to be liquified, shipped half way around the world and then re-gassified again. Quite an expensive process. And don't think the US wont be using this to rip europe a new economic asshole... they will use it as a weapon of economic mass destruction.

Also worth noting, cars don't run on natural gas.... gas powered cars run on LPG, a derivative (albeit a by-product) of cracking oil into petrol.